The Secret to How Facebook Earns Billions of Dollars

You’re probably signed in to Facebook right now though you’re reading this blog post. That’s great! Please do me a favor to click the Facebook share button below after you’re done reading this story. I tell you, I’m also logged in with my Facebook account at this moment while writing this article. This only means that this social networking site has become an integral part of our daily lives. How many hours do you spent everyday sharing your statuses, uploading photos, commenting on your friends’ updates, and chatting with someone? Of course there are still other people who don’t use Facebook as often as I do. But the generality is… most people are spending more time on Facebook than in any other websites on the Internet. We may use Google, but not hang around longer than we linger in Facebook.

Now, while you are lurking around at Facebook, have you ever asked or imagined how much Facebook is earning? And to follow up a more interesting and intriguing question, let’s also ask the secret on how Facebook generates that big amount of revenue and income. If we can uncover that secret, we might also have an idea on how we can generate the same on our own – at least even a small piece of it. So let’s go to the facts and numbers.

Facebook’s revenue and net income

According to Reuters, Facebook generated revenue of $1.6 billion in the first half of 2011. With that revenue, it earned $500 million net income for that period. Facebook’s growing results are influenced by its valuation to roughly $80 billion in private markets. In the first nine months of 2010, the social networking site earned $355 million in net income from its $1.2 billion revenue during that period. With its 750 million active users, no wonder it’s showing a great future. The world’s no. 1 social networking site, cofounded by Mark Zuckerberg, is expected to go on Initial Public Offering (IPO) between April to June 2012, according to the article reported by The Wall Street Journal. This offering could raise $10 Billion, which can value the social networking giant up to $100 Billion. However, Facebook Chief Executive Mark Zuckerberg has not yet made any final decision with regard to this matter.

Where Facebook digs its gold

Now this is the most interesting part, how did Facebook earn billions in revenues? Since Facebook currently maintains itself as a private company, it’s not clear where its $1.6 billion revenue came from. However, we can assume that a big part of this revenue came from advertising and sales of virtual goods, such a digital cars or animals that are offered in the social games like Zynga’s Farmville. But of course there is something deeper from those advertising and virtual sales. Facebook generates its revenue from its 750 million active users, who are spending their hours on this seemingly addictive social networking site. In other words, Facebook is digging its gold from people’s time. Time is gold indeed, isn’t it?

How many hours do you give to Facebook?

Time is gold indeed. If you’re a businessman, you can use one hour to make some good business deals that can give you a nice amount of profit. If you’re an employee, a few hours can already contribute largely to your company’s productivity. If you’re a college student, six hours can already be used to read your books to pass the exam that can give you a brighter future. And if you’re a mom or a dad, twelve hours can already let you give your children the happiest moments of their lives. What I’m trying to say is that your precious time is being given to Facebook with your consent of course. The time you are handing to this sweet social network is as precious as gold. That is why Facebook is mining this gold from you. And if there are 750 million users who are giving their precious time to Facebook, it would not be surprising to know that Facebook is generating billions of dollars in revenue.

Now, I’m not saying that Facebook is one site that should be avoided on the Internet. Facebook is a great site, which can be useful to anyone. Facebook is even helping me promote this blog online. With the nice features of this social network, I can also be able to communicate with my friends and send important messages to anyone in my list. It’s helping a lot of people connect with their friends and loved ones online. If the people behind Facebook earned a lot of money, it did not happen overnight. But just like any sweet things that exist on this planet, too much isn’t good. So before you sign in to Facebook, you should first think carefully of your precious time. Should you give your gold to Facebook or should you use it to a more important matter? And now that Facebook has introduced the “timeline”, expect it to dig more time or gold from you. It’s up to you!

Victorino Abrugar is a business consultant, blogger, speaker and entrepreneur. He's the founder of Optixor, Inc., a digital marketing company based in the Philippines. Follow him on Twitter at @viclogic.